The Foreign Service Journal, April 2003

President Vladimir Putin went from the Ashgabat summit directly to Astrakhan, the princi- pal base of his Caspian fleet (by far the largest in the region), and ordered naval exercises, which took place in August 2002 and involved 60 warships and 10,000 military personnel. Meanwhile, Azerbaijan has inherited the main headquarters and part of the old Soviet Caspian flotilla based in Baku, while Kazakhstan and Turkmenistan have allocated huge resources to the procurement of gunboats and navy equipment. Geopolitical Implications for the U.S. Despite all these difficulties, all indications are that Washington is holding fast to its support for the BTC pipeline. State Department spokesman Richard Boucher issued a statement on Dec. 2, 2002, hailing Georgia’s approval of the pipeline as “a significant milestone in the development of the project which will bring welcome investment to Georgia as well as strengthen the sovereign- ty and independence of countries in the Caspian Basin.” A month later, a Jan. 9, 2003, media note announcing State and Commerce Department sponsorship of a con- ference in New Orleans on Caspian Basin business oppor- tunities expanded on that theme: “The U.S. strongly sup- ports the development of the oil and gas resources of the Caspian Basin and the means to transport them to market …Caspian oil represents the largest non-OPEC source of production growth in the coming decade.” However, that assessment ignores the very real prospect of collapsing world oil prices, once the U.N. trade sanctions against Baghdad are removed with the fall of Saddam Hussein’s regime there. According to an estimate by the Center for Strategic and International Studies in Washington, a $6 fall in the price of a barrel of oil would slash Caspian oil revenues in half. If the price fell to $13 a barrel, most Caspian oil consortia would no longer be profitable. Whatever the future of the competing pipelines, pre- occupation with energy development has led the U.S. to form a myopic picture of these states. By the time we began to realize that the three most important Caspian Basin energy producers — Azerbaijan, Kazakhstan and Turkmenistan — suffered from systemic corruption and non- democratic practices, we had lost much of the leverage on their leaders that we had enjoyed just a few years before. However, it is still not too late to widen our horizons and to rec- ognize the risks that exist in the region, and the ways in which proposed plans for energy devel- opment are increasing some of them. With time the Caspian region seems almost certain to turn into more of a strategic burden to the United States than a strategic asset. Consider just a few of the many headaches the region poses: ethnic conflicts in Nagorno- Karabakh, Abkhazia, Chechnya, and South Ossetia; Uzbekistan’s expansion to become a regional power; Russia’s ambition to reclaim the South Siberian territories lost to Kazakhstan after the breakup of the Soviet Union; and territorial and water disputes involving Turkmenistan, Uzbekistan and Tajikistan. Then add to those ongoing instability in Afghanistan and Islamist plans to create a caliphate in a unified Turkestan. All of these issues are difficult dilemmas for the U.S. regarding the appropriate level of support and security guaranties it should extend to its new Caspian allies. The partial nature of our commitment to the develop- ment of Caspian deposits has led us to create the illusion of a stronger strategic relationship with these states than actually exists. Fortunately, there are signs Washington is beginning to recognize this reality. As we have come to better understand the difficulties inherent in the develop- ment of Caspian oil and gas, the need for pipelines has not been considered of sufficient strategic interest for the United States to be willing to underwrite substantial costs of their construction. Indeed, despite the rhetorical importance that the Caspian Basin has assumed for Washington, the area is at best of secondary significance for the United States. Consequently, U.S. policy in this region should reflect our broader security and energy concerns — those hav- ing to do with the Persian Gulf, Russia, Iran and China; Islamic radicalism in Central Asia, including Afghanistan; and a host of global issues, such as terrorism— not an oil rush for a largely imaginary bounty. F O C U S A P R I L 2 0 0 3 / F O R E I G N S E R V I C E J O U R N A L 47 Despite the importance that the Caspian Basin has assumed for Washington, the area is at best of secondary significance for the United States.